Friday, October 29, 2010

UN FCCC meeting in Cancun: where's global warming?

It's almost 3 weeks now of cloudy sky, or sunny morning but rains in the evening, in Metro Manila and surrounding provinces. Typhoon "Megi" (local name "Juan") has left the country more than a week ago while typhoon "Chaba" (local name "Katring") did not hit Philippine landmass, only the country's "area of responsibility" several hundred kilometers north-east.

From November 29 to December 10 this year, the UN Framework Convention on Climate Change (UN FCCC) will hold another huge and expensive global meeting in Cancun, Mexico, to "fight climate change and man-made warming." The goal of the UN and various governments around the world remains the same: global ecological central planning, more environmental regulations, more taxation of "non-renewable" energy sources, more carbon trading, more climate bureaucracies, more global climate meetings and junkets.

But where is the much anticipated ever-warming of the planet?

I will show 3 graphs below from scientific sources, of course. The first is on global air temperature (the lower troposphere); the second and third are on sea surface temperature (SST). Just click on those graphs to see their larger images.

Here's the temperature of the lower troposphere (TLT) from NASA satellite, data interpretted and plotted by the Univ. of Alabama in Huntsville (UAH). As of last Tuesday, October 26, the TLT anomaly was only 0.044 C or close to zero, compared to the 1979-98 (20 yrs baseline) average global temperature. Data source is

And the more inconvenient truth is that the temperature plunge is on-going, meaning the temperature anomaly can possibly go negative in the coming weeks and months.

Here's the global SST anomaly as of last Wednesday, October 27. Temperature "anomaly" means "deviation from the normal". The SST anomaly continues its plunge in the negative territory. Data is from Dr. Roy Spencer. Dr. Spencer noted, "there is no end in sight to the cooling."

And here's another way of showing the SST as of yesterday, October 28, whether they are "colder than normal" (green-blue color) or "warmer than normal" (reddish). Note the formation of colder than normal sea water west of northern Philippines and south of China. And note how colder than normal the world's oceans are, from north Pacific to the equator to south Pacific, south Atlantic, the southern hemisphere in general. Data source is from

So, what kind of "unequivocal global warming", of "huge melting of polar ice" that can lead to "catastrophic" rise in global sea height are we expecting? Millions of sq.kms. of new sea ice are forming in both the Arctic and in Antarctica.

And here is the real inconvenient truth: whether the world is warming or cooling, whether it's getting drier or wetter, whether it's bad El Nino or bad La Nina, regardless of the world's climate or weather is, the man-made warming religion (MMWR) train will continue with their ultimate goal: to institute global ecological central planning. Of packing more political and environmental powers in the hands of governments and the UN, of taking away more freedom from the people, of taking away from money from their pockets.

Wednesday, October 27, 2010

Declining econ freedom of the Philippines

(Note: this is my article for last weekend.)

Economic freedom has four components: (a) personal choice, (b) voluntary exchange coordinated by markets, (c) freedom to enter and compete in markets, and (d) protection of persons and their property from aggression by others.

That is the official definition in the construction of the annual Economic Freedom of the World (EFW, annual reports, produced by the Fraser Institute in Canada, and its publication and launching in many countries around the world is sponsored by the Friedrich Naumann Foundation for Liberty (FNF).

In the EFW 2010 Report, the Philippines ranked low once more, 76th out of 141 countries covered for 2008. This is a deterioration from the country’s earlier ranking of 68th in 2007 and 47th in 2005.

What caused the deterioration in Philippine ranking in the global economic freedom contest?

There are five areas that determine the economic freedom of the people in each country surveyed. These are (1) size of government, (2) legal system and property rights, (3) sound money, (4) freedom to trade internationally, and (5) regulation. The last is composed of 3 sub-areas: (a) credit market regulation, (b) labor market regulation, and (c) business regulations.

The Philippines ranked low in all 4 areas except area no. 1. It ranked 101st in area 2, 78th in area 3, 80th in area 4, and 84th in area 5. Business regulations – meaning very bureaucratic procedures for private businesses in dealing with government – pulled down its overall rank in area 5.

The country ranked “high” in area 1, because government consumption as a share of GDP was low, only about 12 percent. But this is tricky because the data refers only to the national government. If local government consumption and expenditures are included, the ratio should reach almost 18 percent or higher. In addition, because of corruption in revenue collections, actual payment by the public (taxes and fees plus cost of compliance) is high but officially registered revenues are low. So government budget is relatively “low.”

The low score and ranking of the country in area 2, legal system and property rights, is a cause for alarm. This means that: there is low judicial independence, low protection of property rights, low integrity of the legal system, and there is high military interference in the rule of law and the political process.

The economic team of the new government should reverse this declining level of economic freedom of the country. High economic freedom means more businesses and job creation in the country.

Tuesday, October 26, 2010

Comelec voter registration, 2007

(Note: I wrote this last July 26, 2007. With the holding of the Barangay and SK elections yesterday, I'm not sure if the voter registration one or two months before it was equally chaotic as those three years ago.)

Last Saturday, July 21, the 6th day of the one-week Commission on Elections (COMELEC) registration period for the Barangay and Sangguniang Kabataan (SK) elections this coming October, I applied for a transfer of my election registration record. I have changed residence to Makati City, that’s why. In Makati, the Comelec office is on the 2nd floor of the Makati Central Fire Station. The day before, I went there as it’s just walking distance from our place, inquired what are the requirements, saw the long lines of people wanting to register, and decided to come back the following day.

Saturday around 8am, I walked to the Makati Comelec office, and was turned off early by the long lines of people queuing. The tail was near Tiara Oriental hotel along Malugay st., straight to the central fire station, winding left and looping around the station, with the thickness of the line getting bigger or fatter as it approaches the tables of the Comelec personnel. I decided to come back late afternoon, as I have heard from the people there that those in the front have started queuing as early as 1 or 2 am that day!

And you know what those lines were all about? One line is just to submit a photo copy of any ID (preferably company ID) or other proof and testimony, showing that the applicant indeed lives in Makati. So this is what the people wanting to exercise their right to vote have to endure. First, spend several hours just to submit this ID photocopy or other proof; second, wait several hours more for his/her name to be called, so that a Comelec application FORM will be given to him/her. And third, after filling up the form, wait in line again for several hours to submit the said filled-up form! Can you imagine this very bureaucratic process? Long live the Comelec!

I came back around 2:30pm, the line was still long, though only about 1/6 of its length that morning, so I walked home again, and said I’ll come back after 2 hours, hoping that the line will become even shorter and thinner. Anyway, I was told that Comelec will work until there’s someone in the line. I came back around 4:30pm; the line indeed was shorter, but around the tables of Comelec personnel (or their deputized people), a thick mass of people were still there, probably about 6 to 10 people deep, depending on what lines they’re waiting. Two young ladies beside me were exasperatingly telling us newcomers that they’ve started queuing at 6am to submit their ID photocopy, and until almost 5pm, their names have not been called yet, meaning they did not have the registration form yet! Long live the Comelec again!

In fairness to the Comelec guys, all of them seemed to work hard and even looked harassed. It’s just that there are so few of them compared to the number of people wanting to register. One of them announced that for late-comers, we can leave our ID photocopy that day, and come back the following day and wait for our names to be called and get the registration form. Wow-wow! I said “Ok, this is government. Why not write down my observation with this unfolding bureaucratic procedure.” So I walked home again, and said I’ll go back in the afternoon the following day.

Sunday 2:30pm, I went back to the Makati Comelec again. If I thought the line the other day was bad, this day it’s worse! The line should be about 3x longer than yesterday’s at same hours. I surmised that many people who were not finished registering the other day despite waiting for 10 hours or more, have come back. I also suspected that perhaps some guys with some bad motives orchestrated to make the voter registration complicated and very disappointing, so that some people will be discouraged and go home instead of waiting many hours for those various lines. So I went home and decided to discard my plan to transfer my registration record.

At home, I started writing down initial drafts of this paper while the scenes and my disappointment were still fresh in my mind. Shortly before 5pm, curiousity prodded me out of nowhere to go back and try for the last time! I hurriedly changed clothes, and I was in line about 5:10pm. The lines were moving very slowly, but at least they’re shorter than they were 2-3 hours ago. Around 5:50pm, I noticed that the lines were moving rather fast and quick. By 6:15pm, I was done! My registration form + ID photocopy was received, and I was given a small piece of paper saying that I should come back on July 27 afternoon for the photograph for my Comelec ID. Yehey! I’m through with Comelec bureaucracy after 2days!

Before I went home, I tried to figure out why the sudden quickness in the lines for people submitting their Comelec registration form. My guess is that earlier that day, the Comelec guys were possibly checking the forms submitted by people if they filled up the right answers to some questions. I noticed for instance in my line, that some people cannot distinguish between “previous precinct, barangay, municipality/city and province” that he/she was registered, and their “current address, barangay, city, and province”. When they corrected their mistakes, their registration form was already dirty and had lots of erasures.

In our case, or in our line, the Comelec guys did not bother to check or see the forms submitted to them. They just received the papers, gave us that small paper stating when we should come back for photograph, done. Maybe they were thinking that they’ve been working in those registration tables for 7 days straight, even worked until late evening last Friday and Saturday nights, and there’s no way that they will want to work late on a Sunday night!

A few days after this experience and observation, I was still scratching my head why people have to waste at least 1 day of otherwise productive labor into unproductive hours of staying in line several times just to submit a Comelec registration form. I think this is related to the deliberate imposition of inefficiency why elections have not been computerized until the last May 2007 elections, until now. People who have the biggest motive to cheat have the biggest motive to delay or stop election computerization.

Monday, October 25, 2010

LTO Bureaucracy 2: Renewing a Driver's License

(Note: this is my article for last weekend)

Renewing a driver's license is faster these days than say, a decade ago. But there are several fees outside the official payment in getting a license that jack up the cost to the public – and this money does not go to the National Treasury.

I renewed my driver’s license today (October 21) which expires this Sunday. I went to the Land Transportation Office (LTO) Ayala MRT terminal station at 9 am and I was done by 10:20 am, or a total waiting and procedural period of 1 hour and 20 minutes – which is not so bad.

The fees to renew a driver’s license are as follows:

License fee P350.00
Computer fee P 67.63
Drug test fee P300.00
Medical fee P100.00
TOTAL P817.63

Fees (a) and (b) go to the LTO and the National Treasury while fees (c) and (d) go to LTO-accredited private clinics. There are different private testing clinics at different LTO stations. At the Ayala MRT station LTO office, it is the JnW Drug Testing Center, Inc.

The drug test is very simple. Applicants submit a urine sample – taken right there at the clinic, and that’s the only basis if the applicant fails or passes the test for usage of any illegal drugs or substances. No one seems to fail the test too. This simple test, therefore, does not appear to cost P300 considering the huge volume of applicants that go in everyday. That fee, therefore, is high.

The medical test is also very simple. The staff in a small room simply gets the body weight of the applicant, asks him/her to read the 8th line – smaller letters – of the eye test, and it’s over. No check for blood pressure, no hearing test, etc. Thus, the P100 medical test fee for some two minutes of procedure would also appear high.

Of course people do not want to endure long procedures like their blood pressure actually being checked, undergoing some hearing test, go through chest X-ray, etc. because that would mean longer queuing time at the LTO and probably a higher medical test fee.

The P400 additional fee to the public, when multiplied by about 5 million licensed drivers (cars, trucks, buses, jeepneys, tricycles, etc.) who get their licenses every three years, should be equivalent to about P2 billion every three years or some P667 million every year. This does not go to the National Treasury but the public are required to pay if they wish to get a new driver’s license.

The above rates are all monopoly prices. Whether the driver’s license fee is P350 or P5,000, the drug test fee is P300 or P3,000, the public has no option but to pay. Otherwise, they cannot drive, or they can but without a license and risk harassment on the roads from the police and LTO personnel.

One option for reform in this area is to deregulate the submission of drug test result. People can go to other clinics that are DoH-certified and go to the LTO with their drug test and medical test results already. Most likely, they can get the certificate for such tests at a much price. So they will just pay the driver’s license fee and whatever new fee the LTO will impose. This will reduce the queuing time (30 minutes or less) and the cost of getting a license.

Renewing a driver's license, 2007

(I wrote this last Oct. 22, 2007. Compare the procedures and fees here with above fees)

This afternoon, I renewed my driver's license (non-professional) which will expire 2 days from now. I went to the Land Transportation Office (LTO) at the MRT Ayala station. The place is convenient to visit, its clean and air-conditioned. The procedures are also clear. From the time I stepped inside, it took me only 55 minutes until I got out, with my new driver's license that will expire in 3 years time.

Below are the steps, and expenses, in renewing a driver's license.

1. At LTO office, go to Window 1, get the application form, fill it up.

2. Go to the adjacent room, secure a certificate that you have passed the drug test (DT) and medical test (MT). This entails:

a) Get application form from the accredited drug testing center, fill it up. Here, the clinic is "JNW drug testing center, Inc."

b) Submit a urine test, you pee on a plastic bottle in the toilet inside that room. At least the toilet does not stink.

c) Go to a small room with a male staff (I doubt if he's a physician) for the medical test. The guy just asks you to cover your right eye, then you read the letters from biggest to smallest fonts. The do the same, covering your left eye.

d) Go for a picture-taking, digital.

e) Get the test results, pay P350 (= P250 DT + P100 MT).

3. Go back to adjacent LTO office, Window 1, present the results of the DT and MT, along with the filled-up application form and your old driver's license.

4. Picture-taking, digital, as well as e-signature, for the driver's license.

5. Payment: license fee P180 + computerization fee P67.63 + revision of records (if you change your address) P30 = P277.63

6. Wait for your new driver's license to be released, done.


Total time spent: 55 minutes
Total fees paid: P350 + P277.63 = P627.63

Compared to renewing one's passport at the DFA,the LTO process is definitely faster, but more expensive. New passport cost is P500 only, but should take an ordinary applicant at least 5 or 6 working days to get the new passport.

See also: LTO Bureaucracy 1: Hidden Costs in Vehicle Registration, May 04, 2010

Saturday, October 23, 2010

Richest Filipinos, the top 40

This is posted in one of my discussion yahoogroups. Someone lifted this list from an article by Tony Lopez, Editor of BizNewsAsia. According to Forbes magazine, the richest Filipinos and their respective networths, 2009:

1. Henry Sy Sr., $5 billion (SM malls, Banco de Oro, SM condos, etc.)

2. Lucio Tan, $2.1 billion (PAL, Fortune Tobacco, Allied Bank, PNB, etc.)

3. John Gocongwei, $1.5 billion (Robinsons malls, Cebu Pacific, Sun Cellular, Universal Robina, etc.)

4. Jaime Zobel de Ayala, $1.2 billion (Ayala malls, BPI, Globe Telecom, Ayala Land, etc.)

5. Andrew Tan, $1.2 billion (Ever malls?...)

6. Tony Tan Caktiong, $980 million (Jollibee, Chowking, etc.)

7. Enrique Razon, $975 million (MCTSI,...)

8. Beatrice Campos, $840 million (Unilab?)

9. George S.K. Ty, $805 million (Metrobank, Federal Land, etc.)

10. Eduardo Cojuangco, $760 million (SMC, agri-business companies,...)

11. Inigo and Mercedes Zobel, $730 million;
12. David Con-sunji, $715 million;
13. Emilio Yap, $665 million;
14. Andrew Gotianun, $500 million;
15. Vivian Que Azcona, $445 million;
16. Oscar Lopez, $420 million;
17. Manuel Villar, $380 million;
18. Jon Ramon Aboitiz, $360 million;
19. Mariano Tan, $330 million;
20. Robert Co-yiuto, $310 million;

21. Roberto Ongpin, $300 million;
22. Alfonso Yuchengco, $260 million;
23. Betty Ang, $165 million;
24. Enrique Aboitiz, $150 million;
25. Gilberto Duavit, $145 million;
26. Menardo Jimenez, $143 million;
27. Felipe Gozon, $120 million;
28. Alfredo Ramos, $117 million;
29. Manuel Zamora Jr., $116 million;
30. Wilfred Uytengsu, $115 million;

31. Benjamin Romualdez, $110 million;
32. Wilfredo Keng, $100 million;
33. Tomas Alcantara, $99 million;
34. Bienvenido Tantoco Sr., $95 million;
35. Frederick Dy, $70 million;
36. Eugenio Lopez 3rd, $68 million;
37. Lourdes Molina, $65 million;
38. Luis Virata, $57 million;
39. Jesus Tambunting, $55 million; and
40. Philip Ang, $50 million.

Filipinos with Chinese and Spanish blood are the richest Filipinos. Gone are the days of the landed elites, the "comprador bourgeousie" in the words of a famous Filipino Maoist, and the politician-feudal lords.

It's hard work, efficiency, entrepreneurship and luck that drove those men into high financial positions. Those guys should also have some good political connections so that the level of government intervention will not chock them. Or such intervention will prevent the entry of new big players, especially the multinational players. But nonetheless, it's mainly hard work and efficiency more than politics and political connections, that brought them up. Except for a few guys perhaps.

Friday, October 22, 2010

Statist paranoia, part 6

A friend in one of my discussion yahoogroups keep criticizing or attacking my what he calls as "free market extremism", but he has not answered clearly the other points I raised earlier. Here is my rebuttal to him.

1. Government bail-outs of failing corporations, why would you support it? Or why can't you attack it? As I argued earlier, corporate expansion and corporate bankruptcy are 101 percent part of capitalism. Why do people, from politicians to state bureaucrats to statist individuals, cry and wonder that there are large corporate failures? Why use taxpayers' money to bail out corporate irresponsibility?

2. Endless govt borrowings and rising public debt, why can't you attack it? You even justify or urge the government to create new taxes just to cover up its fiscal irresponsibility?

Ang taong sumusweldo ng P50k/month pero gumagastos ng P55k or higher per month on average even without emergencies ay tinatawag na maluho, mayabang gastador, ulol, gago, pala-utang. Why can't the same be said of governments who always live beyond their means? To have budget deficit for 1 or 3 or 5 years would be understandable. But not for 10 or 20 or more years consistently.

3. Withrawal of govt subsidy for MRT/LRT, it's a good move, why did you attack it? If you have to be a consistent statist, then you should demand that govt should also subsidize the commuters in Cebu, Iloilo, Davao, CDO, Bacolod, Baguio, Dagupan, Naga, Legaspi, etc. etc. Why subsidize only commuters in Metro Manila but not the commuters in the rest of the country?

4. Taxing hot money, a private contract between the publicly listed corporations and its investors abroad, why should govt meddle? Cebu Pacific for instance wants to start an IPO, I read that they need about P25B quick, to buy new airplanes, etc. because of its expanding domestic and international routes. Some investors abroad believe in that company, they bring in their money. If many of them decide to pull out their money, say after a few weeks, after the airline co. has already placed orders for new airplanes, meaning hot money wants to exit at the time the local company already compromised with new expenditures, what's wrong with that? It's Mr. Gokongwei's problem where to get money for the exiting hot money, or the price per share of the company will significantly fall. Is it your problem? DOF or Malacanang problem? Not a bit. You're not part of it, unless you are also an investor in that IPO. Why bring in the state to introduce price distortion?

5. Extending the argument, if some rich friends here in the yahoogroups would also decide to dream big and start an IPO for their respective companies because they find borrowing money via the stockmarket as cheaper than borrowing from banks. And there are people from abroad who believe in their corporate vision and corporate strategies to expand, they bring in their savings and buy into the stocks of the local company. But the foreign portfolio investors later decide to pull out after a week or a month, what's wrong with that? Maybe the issuing local company got involved in some financial scandal or what have you. Is it your problem when the owners of those local companies would scratch their heads where to get money to return the money of those from abroad who earlier have faith in them? Why bring in the state to introduce price distortion?

6. Not only former NEDA chief Ciel Habito, but also Prof. Ben Diokno of UPSE, they propose the imposition of a "Tobin tax". Diokno defined Tobin tax as a tax on "socially useless activities" like hot money that he thinks are even dangerous to the macroecon stability of any country once there is large fluctuations involving huge amount of money, affecting the exchange rate, the forex reserves of private banks and the central bank, etc. Thus, he proposed something like 4% Tobin tax on hot money, on top of existing taxes on hot money already.

If hot money and portfolio investment is such a "socially useless" activity, why only 4% tax? Why not 100% tax? or 200%? Why the hypocrisy of calling something as useless then slapping just a small tax? Kill it, discourage it, it's useless and dangerous anyway.

This is not to attack Prof Diokno who is a friend and my teacher twice, in Econ 151 (undergrad) and DE 251 (PDE, graduate). I'm attacking his proposal to impose a Tobin tax on hot money.

The source of disappointment of many people in this country is always the government, the state, and its many politicians and central planners. If the private sector is their problem, say they think that Mr. Sy is a fat a__ capitalist exploiter, then easy. All they do is to stop patronizing any SM mall, any BDO, any other companies with the Sy signatures. There are options, they can go to an Ayala or Gokongwei mall, or a George Ty or Yuchengco bank, etc. The public have choices and options when it comes to the private sector. But the public has ZERO choice when government comes in. Why keep giving more role and more intervention to an institution that is the cause of disappointment of many people?

Wednesday, October 20, 2010

Got published in WUWT

My article below, "Typhoon Megi and SST anomaly in East Asia" was published by WUWT, a popular science blog that attracts about 2 million pagesviews per month on average. Here it is,

I'm happy to see prominent guys like ocean scientist Bob Tisdale making comments to my article.

Thanks to Anthony Watts (blog owner) and Charles the Moderator for giving me such opportunity to get published in the prestigious WUWT blog.

Tuesday, October 19, 2010

Migration and Freedom 5: Conferences on Liberty and Migration

(Note: this is my article for People's Brigada News last weekend. It should have been published two weekends ago, but I failed to submit it on time, so they posted it only last weekend.)

Jakarta, Indonesia – Liberty is absence of coercion. A society that has less coercion, less regulations, restrictions and prohibitions, is more free. Whatever regulations and coercion that are instituted in society, these are meant to enhance individual freedom, not restrict it.

Advancing individual freedom and the free market is a continuing theme of the annual Pacific Rim Policy Exchange. The last conference was held in Sydney, Australia last week, September 28-30. I was one of the 80-plus participants from countries surrounding the Pacific Rim from four continents – North America, South America, Asia and Australia. I was given a travel scholarship by the main sponsor, the Americans for Tax Reforms. The other 3 sponsors of that activity were the Property Rights Alliance (PRA, US), Heartland Institute (US) and the Institute for Public Affairs (Australia). I was one of the panel speakers on the panel, “Getting free market messages out”.

After that, there was a one-day activity, “Pacific Rim Conference on Climate Change”, October 1, held in the same hotel, Sheraton on the Park, and was sponsored by the Heartland Institute. I also attended that conference.

This week, I attended another important forum, the Economic Freedom Network (EFN) – Asia Conference held in Sultan Hotel in the capital city of Indonesia, October 6-8, 2010. The theme of this year’s conference is “Migration and the Wealth of Nations”. The event was mainly sponsored by the Friedrich Naumann Foundation for Liberty (FNF) and co-sponsored by six other free market-oriented think tanks, three based in Indonesia, three based in the US, Canada and UK.

FNF invited me in the conference to be one of the 9 moderators in 9 panel discussions. I moderated the panel on “Preparing migrants before departure” and the two speakers in the panel were Dr. Arianto Patunru, Director of LPEM and Economics Professor at the University of Indonesia, and Zubair Ahmed Malik, former VP of the Pakistan Chamber of Commerce and Industry.

Migration happens because people want freedom. Economic, political, cultural, religious, personal freedom. People mobility across countries and continents is a perfectly rational human behavior. Restricting such freedom by individuals is not an appropriate role or function by governments. Unless some people have committed a crime against their fellows in their home country, then their freedom to move outside should be curtailed.

Liberty and migration will continue as people seek better lives for themselves, their families and their communities.

* See also Migration and Freedom 4: Filipino entrepreneur in Germany, June 04, 2009

EFN Asia 5: MG Thinkers Now with EFN

I was very happy when the coordinator of the Economic Freedom Network (EFN) - Asia, Dr. Gorawut Numnak, informed me first in Jakarta two weeks ago during the EFN-Asia Conference, that Minimal Government Thinkers, Inc. is now a member of the network. Today, he sent me an email officially welcoming us to the network. Thanks Gorawut, Dr. Rainer Adam and other members of the network!

Also posted in the EFN Asia website, are 3 other new institute members -- EBI Think Tank in Mongolia, Institute for Democracy and Economic Analysis (IDEAS) in Malaysia, and Prabodh in India. A new individual member, also a personal friend, Dr. Mao Shoulong from China, was welcomed.

In the Philippines, there are 3 other institutes that are EFN members:

1. Foundation for Economic Freedom (FEF)
2. Foundation for Revenue Enhancement (FReE), and
3. Center for Research and Communication (CRC).

The first two do not have websites yet. CRC has a website for its publications.

Personally, I have attended the EFN Asia conferences in the past even if MG Thinkers was not a member of the network yet. From 2004 to 2006, the Atlas Economic Research Foundation (based in Washington DC) through the able leadership of its former VP for Institute Relations, Ms. Jo Kwong, partnered with FNF in holding a one-day conference or colloquium prior to the EFN Asia conference proper. Atlas always invited me to such activities.

I have attended the following events:

2004: Hong Kong; "Asian Resource Bank Meeting", then EFN Conf: "The role of Governments in Asian Economies". In the picture, from left: Ellen Cain (FEF, now living in the US), Colleen Dyble and Jo Kwong (previously with Atlas), me, a guy from Pakistan, and Robert Lawson, author of EFW annual reports.

2005: Phuket, Thailand; "Constitution of liberty in Asia" roundtable discussion, then EFN Asia conference. In this picture, from left: Simon Lee (LRI, HK), guy from ALT, Turkey; Chung-ho Kim (CFE, S. Korea), Orly Sanjaasuren of Mongolia, Leon Louw (FMF, S. Africa), Mr. You (JTR, Japan), and Mohit Satyanand (Liberty Inst, India). The two ladies are Charu Rizal (The Boss mag., Nepal) and Colleen Dyble (previously with Atlas).

2006: Kuala Lumpur, Malaysia; EFN Conf. on Trade. A group picture here at the venue, Corus Hotel.

2008: Manila; EFN Conf. on Property Rights.

2010: Jakarta, Indonesia; EFN Conf. on "Migration and the Wealth of Nations".

I think there was no EFN conference in 2007. In 2009, the conference was held in Siem Reap, Cambodia (where the Angkor Wat is located), I was not invited there.

So there. Now that we are officially a member of EFN Asia, we expect to have more collaborative work with other members in the network. The members have varying background but the goal is clear and straightforward: to advance economic freedom in Asia and the rest of the world.

See also:
EFN Asia 1: From HK to Phuket to KL, September 16, 2006
EFN Asia 2: Hayek in Asia, September 20, 2010
EFN Asia 3: Conference in Jakarta, October 06, 2010
EFN Asia 4: Migration and Freedom, Jakarta Conference, October 09, 2010

Typhoon Megi and SST anomaly in East Asia

Typhoon MEGI (local name "Juan") has crossed the Philippines' landmass but still on the western side of the country's area of responsibility as I write this.

A gasoline station toppled by Megi's strong winds. Photo taken from Business Mirror today. Megi is the 10th typhoon of the year in this country and among the strongest this year. So far, at least 10 people have died, mostly due to collapsed structures or drowning.

Before MEGI came, Metro Manila and the surrounding provinces were cloudy everyday last week except last Sunday, but then it rained that night and the clouds ruled the sky until today because of the typhoon. Two weeks ago, I was in Jakarta, Indonesia and all four days that I was there, it was cloudy there, with rains in the afternoon.

I checked the sea surface temperature (SST) anomaly to see if La Nina has already settled in East Asia.

This is the SST anomaly as of July 29, 2010. Click on the graph to see a bigger picture. Formation of La Nina -- indicated by the movement of cold sea water, the blue color code, from east to west, or more specifically from South America to Asia -- was rather weak then. Graph source,

And here's the SST anomaly as of yesterday, October 18. Compared to the graph above or 2 1/2 months ago, the following are notable: (1) Cold sea water has consolidated in a big part of central Pacific Ocean, especially along the equator.

(2) But the eastward movement of colder than normal Pacific Ocean water has stalled since end-July although the degree of cooling has accelerated. East Asia though, including the Philippines, Malaysia and Indonesia, still has warmer than normal sea water.

(2) North Pacific is now generally cooler than normal compared to end-July. Note the consolidation of cold water south of Alaska.

(3) South Pacific, even South Atlantic, now generally much cooler than normal too.

(4) Indian Ocean also showed the formation of cooler than normal sea water.

Here's SST anomaly for Nino 4, the region closest to East Asia, as of October 17, 2010. Data is from Australia's Bureau of Meteorology. Note that the cooling this year in Nino 4, about -1.2 C colder than normal as of mid-October 2010, is more severe than the cooling of 2007-2008 La Nina, where SST anomaly as of mid-October 2007 was only about -0.5 C. Consider also that we just came from a bad El Nino just a few months back.

The warmer than normal sea water is somehow "trapped" in East Asia and west/north Australia. I am not a meteorologist or any climate scientist to make any intelligent discussion about the implication of this trend in the region's weather. But perhaps this explains the formation of this rather strong typhoon Megi that lashes out the Philippines for two days now. It should move west or north-west and will soon slam Vietnam or southern China.

The current typhoon and the damages it caused should pose another question mark to the believers of the "man-made warming" claim, at least in east Asia. On the other hand, it might bolster the claims of "man-made climate change" where "global warming makes dry weather drier and wet weather wetter." What a life.

Monday, October 18, 2010

Statist paranoia, part 4

In another discussion yahoogroups, my co-debater there complained that I "resort into 'Sloganeering' and 'name-calling,' and insinuating that everyone who goes for some form of regulation or taxation is either a 'statist' or a 'socialist'."

I apologized to him and others in the said yahoogroups, for insinuating that people who love more state intervention, regulation and taxation, are also socialists. The term "statist" however, is more appropriate. More power to the state to regulate and intervene in our lives, in our enterprises. So, statists. I make no apology for such terminology. So I will keep using that term.

Our advocacy for minimal government, for more free market, for less -- not zero -- govt intervention, regulation, prohibition and taxation -- should be seen as expanding the range of intellectual discourse in the country. We've seen the Partido Komunista ng Pilipinas (PKP, pro-Stalin) in the 40s-60s, the Communist Party of the Philippines (CPP, anti-Stalin, pro-Maoist) from late 60s to the present, the various shades of socialists groups and parties (PDSP, BISIG, SWLP, Pandayan, etc.). Even the majority of NGOS act and speak like they are with govt, instead of being non-govt. Have you heard of any libertarian party or group in this country?

To equate the free market economy as equivalent to a "dog eat dog system" is hyper confusion of, if not an insult to, the economics discipline. Go back to Econ 11 (Basic Econ) and Econ 102 (Micro Econ).

Supply is upward-sloping, demand is downward sloping. A low point in the demand curve can never meet the high point of the supply curve, no market-clearing. Both consumers and sellers realize it, one cannot sell and the other cannot buy, they both feel miserable. So sellers adjust their supply offer price downwards, and consumers adjust their demand offer price upwards. They meet at an equilibrium price, supply meets demand, zero govt intervention needed, taxation or subsidy, and everyone is happy. Freedom of sellers and consumers to meet and adjust with each other. If seller A cannot satisfy the offer price of a consumer, the latter moves to seller B, to seller C, and so on, until consumer meets the appropriaite seller where their offer price to each other exactly match. Free market. What is so difficult to understand about it?

I did not say that "anything that isn't free market is now totally wrong." I asked him where that statement allegedly from me came from. It was just his fabrication.

Believers of limited or minimal government, of free market and more individual liberty, do not propose that government should be abolished. Personally, I believe that govt should be BIG -- in running after killers, murderers, rapists, thieves, robbers, kidnappers, carnappers, extortionists, terrorists, bombers, arsonists, land-grabbers, other criminals. I cannot leave it to the free market like you and me, in dealing with armed killers and organized criminals. If an armed hold-upper will block my way while I'm walking and demand that I give him my cell phone and wallet, and there's no way for me to run away quickly, I will readily give it to him, so long as he won't stab or shoot me. There should be a bigger armed force that should stamp out those armed criminals.

Thus, the advocacy for free market is not absolute. It is focused mainly on the economic sphere. You, me and others, as consumers, we want lots of choices. Dozens or hundreds of choices. That is why people love the malls, the tiangge-tiangge, Divisoria and Baclaran, because of the huge choices among many sellers and many products on sale. Free market means encouraging the blossoming of more businesses, more shops, more sellers, more capitalists, more profit-driven entrepreneurs. So that consumers will have more choices who to patronize among them. Sellers who are lousy and non-friendly to consumers will slowly go bankrupt. And future consumers are protected from such lousy and unfriendly sellers. The prospect of bankruptcy is a fear that helps discipline sellers and suppliers to think of consumer interest as much as possible. Free market, freedom to expand, freedom to self-destruct.

To say that "free market capitalism and Marxism socialism are the same in some respects or the flipsides of the same coin" is wrong. Socialism is state ownership of the means of production (in behalf of the proletariat). Capitalism is private ownership of the means of production. How could they be the same? Statism is concentrating the power in the hands of the state to regulate people's lives -- where they can smoke or not, where they can put up a bake shop or gas station and where not, when they can start operating a business and not, how much they can keep and bring home out of their monthly income, etc. Free market is concentrating the power of running one's life with the individual.

If an individual wants to meet his creator soon by over-drinking or over-smoking or over-eating fatty foods, why should the state prevent him by giving him free or subsidized healthcare (from other people's tax money) to prolong his life because "health is a right"?

Sunday, October 17, 2010

Statist paranoia, part 3

The price of anything is a good indicator of how free or how scarce a good or service is. Air is free when we're on land. But air is for sale and has a price when you go scuba diving, or when you climb very high mountains like Mt. Everest.

In public policy, it is not good to provide things as free -- like free healthcare, free housing, free transport ride, free agri credit, etc. When something is given for free, supply will always be bigger than demand, and that will result in supply problem, resulting in rationing. Like the food rationing, healthcare rationing, in many communist countries. In many rich countries now, there is healthcare rationing already. If your disease is not so urgent, a free physician will attend to you after several weeks or even months.

Example, you have a headache. The "free" physician may request for some diagnostic tests, then give you some medicines. But you can insist, "I want a CT scan; I want a skull X-ray" because you suspect there could be other problems on your head. It's free anyway, why not? The hospital staff will say, "Yes, but so many people also want a free CT scan, free skull X-ray, you come back after 2 months."

And that is where some problems and disappointment with welfarism come in.

A friend asked me this question:

Noysky, How did you in recent years become such a die-hard free market advocate?

Some economists in the Third World (Peru's Hernando de Soto, for instance) agree that the free market is a "more efficient" system for
reaching or sustaining economic development than a controlled state economy.

But they also argue that it works better only in some countries whose people have a certain mindset, a certain set of values shaped by its historical and socio-cultural experiences.

In this case, it has worked for peoples of Europe (at least most of it) and North America. But people who have undergone a different historic evolution (such as the case with former colonies whose resources were exploited, such as countries in Latin America, Africa and some in Asia), there is not the kind of mercantilist class that developed among the locals, who can make it function well....

When I got "converted" to the free market thinking, I did not read much world history. I did not read much political philosophy. I have not even read Hernando de Sotto's famous book, "The mystery of capital". I just looked around the country. The food sector for instance, has almost zero government presence -- no govt carinderia or restaurant corporation, no govt fish/vegetable/meat dealer corp., no govt food insurance corporation, etc. And people are eating. There is a "market" -- where supply meets demand -- for everyone, from the poor to the rich.

When people complain of expensive food, expensive clothes, expensive shoes, expensive tools, they do not rally in front of DTI or DA or Malacanang or Congress, to demand price control of food, clothing, shoes, tools, etc. No. Only statist NGOs, media and academics think they should do so. People go to Divisoria, Baclaran, Quiapo, tiangge-tiangge (literally "market-market") and find the things they need at a price they can afford. Free market works. No need to read Hayek or Mises or Adam Smith or the history of Europe and north America.

Look around the country also. Lots of "tambay" in several neighborhoods. Some of them have zero ambition -- just to drink and party everyday or everynight. They smoke and drink and gamble like they have no responsibility to their kids or siblings or others. Then they become poor. Or they have dilapidated lungs or liver or kidney. Then government says we should pay more taxes because many people are poor and have lung cancer and liver cancer and have stab wounds after a fight. Wow, great logic.

Things like that. That's why in most of my writings, I do not cite any philsopher or other free market writer. Just plain, day to day experiences and observations. If you want to refuel for your car, do you wish that the government will over-regulate and control the local petrol industry and that we should buy only from Petron or any other state-owned monopoly in other countries? That the fredom of choice which petrol company, which gas station that has a clean toilet and friendly staff, be removed from us?

It's our daily experiences and observations that can tell us whether more coercion and more government intervention, regulation and taxation is good for us, our family, our work and school, and our community.

Saturday, October 16, 2010

Market segmentation vs. central planning, health sector

(Note: this is my article today for

Market segmentation is respecting the diversity among consumers who have different needs with different goals and different budget and resources. It allows price and product differentiation. Central planning abolishes market segmentation and price differentiation. There is one centralized service provision at a standardized and homogenized service standard or quality at homogenized budget and price. Where there is uniformity and homogenity, what follows next is mediocrity.

In food sector, there is no government carinderia corporation, no government restaurant administration, no government supermarket agency, no government fish and vegetable seller or fastfood chain or turo-turo corporation, no government food insurance corporation. And people are eating.

In health, there are thousands of government rural health centers, thousands of government-sponsored “botica ng bayan” and “botica ng barangay” (village pharmacies), hundreds of government hospitals run by both national and local governments, there is government health insurance corporation, there is government drug price control policy, government mandatory drug discount policy (20% + 12% expanded), various health programs -- and health problems are expanding.

What explain for this difference? Market segmentation. In food, clothing, shoes, buses, shipping lines and airlines, there is price and product differentiation The rich get more pricey services while the poor and middle class get less glamorous but nonetheless get certain services at a lower price. The poor's P20 per meal does not mean that it is less nutritous or it is poisonous, compared to the rich's P1,000 or more per meal. There is a market for everyone along different income groups, along different geographical units.

When government comes in like in healthcare, market segmentation and differentiation is generally abolished. There is no incentive to provide extra good care, extra effort to please and serve the public. The salary and bonuses are the same anyway, whether one serves 30 or 50 people, so why serve 50? This explains why the lines and queuing in many government offices and health centers are long. Perhaps this will discourage more claims for government benefits, like PhilHealth claims.

There is danger in relying too much on centralized government service delivery. Market segmentation allows people to jump and choose from one service provider or food seller to another, until they find one that serves their need and budget. There is public welfare here.

The drug price control policy is another classic example of how central planning can lead to rigid and inflexible decision making. Since June 2009 up to early this year, there have been many meetings by the DOH Advisory Council on Price Regulation. Being one of the four members from the CSOs, I have attended most of those meetings. Speakers from the industries -- local pharma, multinational pharma, hospitals, drugstores, pharmacist association, physician association -- are one in saying that price control does not achieve its goal of making essential, branded (and sometimes patented) medicines affordable to the poor. But the policy is still intact until now, zero sign that it will be pulled out by the DOH.

Fifty percent of X is still "expensive" for the poor because the poor want the price to be zero. The rich and middle class are jumping with lots of savings from continued patronage of branded products by the multinational pharma. And we thought that the DOH is heavily promoting generics drugs, not branded drugs? Watsons and other drugstores' data are showing that more and more people are switching back to branded drugs by multinationals. This seems to be the new goal of the DOH now.

Government should learn to step back and allow competitive service provision and pricing by different product and service providers. Government should also step back from intrusive and distortionary high taxation.

RP's external debt, 2000-2010

Below is the Philippines’ total external debt, in US$ billion.

2000, 51.21
2001, 51.90
2002, 53.64
2003, 57.40
2004, 54.85
2005, 54.19
2006, 53.37
2007, 54.94
2008, 53.86
2009, 53.27
June 2010, 56.99


External debt has generally flattened this decade, with this year's level similar to the 2003 level of $57 billion. Nonetheless, a debt is a debt that must be paid someday. The sooner than our external debt will be drasticallyy reduced, the better. Thus, instead of rising from 2009's level of $53.3 B to this year's $57 B, it should decline to $50 B in the next few years, down to $40 and lower through the years.

Debts were incurred in the past to improve current and future economic conditions of the country. Thus, current and future debts should be declining, not flattening or rising.

Big governments though, have the ugly habit of keeping the debts high so that they too, can take out huge loans on their own as current administration pay off the debts of past administrations. The vicious circle goes on.

Friday, October 15, 2010

Rule of Law 11: RoL Index

It's the first time I've heard of the "Rule of Law Index". I saw it first in a news report today, Philippines slips in Rule of Law. The report said,
THE PHILIPPINES has slipped in terms of providing a strong justice system and addressing corruption, according to a new global index upholding the rule of law.

The World Justice Project (WJP) found the Philippines dragged down by weak justice systems and corruption in the latest version of its Rule of Law Index released in the United States yesterday.
Intrigued by this report, I googled the WJP, searched the index and and I found this 146-pages long report, 3.9 MB pdf, The World Justice Project, Rule of Law Index™ 2010.

This is a very timely research project. The Index is composed of 10 factors:
»» Limited government powers
»» Absence of corruption
»» Clear, publicized and stable laws
»» Order and security
»» Fundamental rights
»» Open government
»» Regulatory enforcement
»» Access to civil justice
»» Effective criminal justice
»» Informal justice
Below is their definition of the "rule of law". A bit long compared to say, Hayek's definition, but this seems more complete too:
The four “universal principles” that emerged from our deliberations are as follows:

I. The government and its officials and agents are accountable under the law.

II. The laws are clear, publicized, stable, and fair, and protect fundamental rights, including the security of persons and property.

III. The process by which the laws are enacted, administered, and enforced is accessible, fair, and efficient.

IV. Access to justice is provided by competent, independent, and ethical adjudicators, attorneys or representatives, and judicial officers who are of sufficient number, have adequate resources, and reflect the makeup of the communities they serve.

If I remember it right, this is Hayek's definition of the rule of law: "The law applies to everyone, no exception. The law applies equally to unequal people."

Very simple and direct.

Now, how did the Philippines ranked out of the 35 countries covered by the study? The cities covered by the survey were Manila, Cebu and Davao. Page 74 showed this Philippines' ranking:

1. Limited government powers: 17th out of 35 (17/35)
2. Absence of corruption: 26/35
3. Clear, publicized and stable laws: 24/35
4. Order and security: 20/35
5. Fundamental rights: 26/35
6. Open government: 19/35
7. Regulatory enforcement: 20/35
8. Access to civil justice: 28/35
9. Effective criminal justice: 20/35

Meanwhile, I wrote these two related papers this year:

1. Laws and the Individuals

February 26, 2010

(This is my article "People's Brigada News", a weekend tabloid circulated in southern Metro Manila)

In judging candidates whether they will become good President or not, one usual criteria that many voters demand, is the number of laws that a legislator-candidate has authored. That is,

More laws authored = good legislator = good President (or Mayor/Governor)

There are practical reasons for this kind of reasoning. One of which is that legislators (Senators, Congressmen/women, Provincial or City Councilors) who were once showbiz and sports superstars, those considered “less cerebral” but got elected because of their popularity, tend to craft the least number of (national or local) laws and were just silent and passive in various debates being considered by the (national or local) legislature.

While this observation is valid, it is also important to ask questions like:

What are laws, in the first place?
Are all laws beneficial to individuals?
Is having plenty of laws good for society?

I offered this approach, or asked those questions, because I want to offer an alternative definition of laws. Here it is:

Laws are prohibitions. They are restrictions that individuals are not supposed to commit; otherwise, there are certain penalties for not obeying the laws.

For instance, there are no laws (no prohibitions) against breathing or flying in the air, but there are laws (and prohibitions) against polluting the air. There are no laws (no prohibitions) against eating, but there are laws against selling expired or poisonous food.

The most famous laws are the laws against killing, stealing and rape. There are harsh penalties for committing such crimes.

Some laws are not outright prohibitions, but more on appropriating a budget or giving subsidies or exempting from certain taxes, fees and regulations. to certain sectors of society. Or issuing price control or profit control of companies in a particular sector. Still, there are penalties for not giving the stated subsidies or exemptions, or not following the price control. So in the end, they still fit in the original definition that “laws are prohibitions.”

So now that we establish the simple definition of laws, is it good and desirable if there are plenty of laws in society? Will people be happy if there are plenty of prohibitions in our communities, schools and offices, more prohibitions in our lives?

It is doubtful that people will desire to have plenty of laws and prohibitions in their lives. Take the case of owners of land and houses. First there is a law on real property tax (RPT). RPT is the government’s way of saying, “all lands belong to the government”, that is why people, including owners of land and small lots, must pay a tax or “rent” to the government. Failure to do so will empower the government to expropriate a private land and use it for its own use, or sell it to other people.

Second, in a few cities and municipalities in the country now, there are prohibitions for people to introduce changes or renovation inside their own house or office, unless they first get a “permit to renovate” from the city or municipal hall. And after they finish the renovation, they need to secure a “permit to occupy” their own house or office. Somehow, this is strictly enforced only in big office buildings. But let us wait in the future for this law to be strictly enforced in our own houses as well, when local governments have better monitoring and spying capabilities.

Another negative impact of having too many laws, both national and local, from more “hardworking” legislators, is that it is becoming more difficult for the ordinary citizens to know and remember all those laws and prohibitions. Is there a law against spitting in the streets? If so, in what cities or municipalities? Is there a law against smoking inside jeepneys and tricycles? Is there a law against drinking outside your house? Is there a law against hitting the butts of children if they violate certain rules set by their own parents? Is there a law against keeping dogs that occasionally bark at midnight?

It is important to keep a few laws that really protect everyone. Like the laws against killing, stealing and rape. But when there are too many laws and restrictions, individual freedom is compromised, and more people will be tempted to evade, if not break laws. And this erodes respect for the rule of law.

So, we go back to the original issue: is a legislator-candidate who has authored many laws, a good and desirable candidate for President, for Mayor, for Governor?

This should be a good mental exercise for voters. But for me, my vote is NO. I will go for a candidate that has crafted the least laws and prohibitions. But this is not to support lazy legislators either, who do practically nothing and hence, enacted nothing. Because such lazy legislators have also allowed and did not block the enactment of new laws and more prohibitions from the more “hardworking” legislators.

Let us support candidates who will give us the least restrictions, the least taxation, the least subsidies and regulations. Because such candidates will give us more leeway to better work and plan for our own lives.

(2) Small act, big message in following traffic rules

July 05, 2010

Some people, including those in government, keep on harping that the President should not stop on red light because of "wasted time", because of security concerns, etc.

They just can't get it. The President or anyone with a driver stuck in traffic will have no idle moment if he/she wants to. If i were rich, I would also get a driver and I will have zero idle minutes. I can work on my computer, read a newspaper or a book, make or receive text messages or phone calls, look around and take pictures of some idiots hanging around, doing nothing and discussing what kind of subsidies the government should give them.

The President already said it over and over again. If he has an important meeting, then he will wake up early, leave early, arrive in meeting on time, and there will be no need for his security escort to shoo away ordinary motorists as if they are a burden to society. Which past administrations, the last 2 especially, have been doing.

And I don't beleive that the President's SUV is not bullet-proof. Plus it is surrounded by armed guards on big SUVs and motorcycles. Security concerns is not much an issue.

Another advantage of the President being stuck on traffic, is that the DPWH, MMDA, DOTC and LGUs will be on their toes ALWAYS. If the President got stuck in traffic because there is a badly-managed road digging under DOTC project, or a local government was lazy in removing those counter-flowing trisikads and tricycles, or MMDA and/or DPWH were lazy in clearing a clogged drainage that causes flooding even for slight rains, they they will get some official reprimand perhaps.

The other day, I rode a jeepney and I was talking to the driver in QC. He started the conversation, noting that "wala na akong naririnig na wang-wang ngayon" (I don't hear those loud sirens now) while smiling. I added, "nabawasan na mga mayayabang sa kalsada" (the braggarts have been diminished) and he added further, "pati mga nagka-counterflow, wala pa akong nakikita" (I havent seen counter-flowing vehicles too). And that's only 3 days from the President's inauguration.

Small acts of no wang-wang, stopping on red light, by the president. Small time "wasted" being stuck on red light. But BIG symbol to the public, to respect the law, ordinary traffic laws.

See also:

Rule of Law 1: Entrepreneurship and Government Permits, September 16, 2008
Rule of Law 2: Property Rights and Lefts, March 02, 2009
Rule of Law 3: AIG Bonuses, Government Bail-outs, March 18, 2009
Rule of Law 4: On Thailand Crackdown, April 18, 2009
Rule of Law 5: Lawless State, Corruption and Coercion, August 01, 2009
Rule of Law 6: Discussions in Facebook, January 10, 2010
Rule of Law 7: Property Rights and IPRI 2009 Report, February 27, 2010
Rule of Law 8: Purpose and Supremacy of the Law, June 15, 2010
Rule of Law 9: Laws, Prohibitions and Corruption, June 30, 2010
Rule of Law 10: On Wang-wang and Government Laws, July 04, 2010

Posted on May 19, 2009:
Hayek 1: Liberty and liberties
Hayek 6: Dangers of majority rule
Hayek 7: Rule of law means no exception
Hayek 8: Safeguards of individual liberty
Hayek 12: Rule of law and rule of the lawless

Thursday, October 14, 2010

Statist paranoia

My co-debater in the earlier thread, "NINJA loans" below made further rebuttals. Unfortunately, his counter-arguments that free market policies caused the recent global financial turmoil were actually pointing to heavy state intervention as the real cause.

Here are some of his statements, in quotations, and my comments to them.

1) "US government... supporting oil cartel, and engaging in war in Iraq and Afghanistan" -- those are state interventions, not free market policies.

2) "there is coercion from the long range of economic strategies of war economy." -- again, state intervention, not free market.

3) "If coercing banks to lend money by way of NINJA Loans, I think that should be the case." -- another justification of state intervention.

4) "US Govt using Taxpayers' money bailed them out. And they even have the temerity of having "bonuses" during these financial crises." -- that is one product of state intervention. Why would those failing but bailed-out corporations not give away bonuses to their people? Even if they will give away money to their non-employees, the US government and its interventionist policy will bail them out anyway, the US government has oodles of tax money anyway, why won't they do it?

If you expect free market solution to those troubled corporations, the proper policy would be to let all of them go through bankruptcy proceedings. There is penalty to corporate irresponsiblity. You don't reward it with tax money bail-out.

5) "How about international trade? How about the on-going currency war? How about the external debt problems of America?" -- those are signatures and indicators of heavy state intervention. No free trade, so negotiations by government trade bureaucrats dictate the terms of trade. Currency war is a spat among central planners in central banks in different countries. Debt problems is pure fiscal irresponsibility. Living beyond one's means. If your revenue is less than your expenses, every year for many decades, why not cut spending? Why raise public debt to the roof?

Those sentences are clear statists' inconsistencies.

Then he came back with one of the most ridiculous sentence:

"Free market does not exist in the real world."

Wow, what a hypocrisy of statement.

You want to buy a cell phone -- Nokia, Samsung, Motorola, Android, etc.; and within nokia for instance, you choose among 60+ models depending on your needs and budget. This freedom to choose a brand and model of cellphone, the competition among cell phone manufacturers to attract more buyers, this does not exist?

You want to deposit your money in a bank -- BDO, BPI, Metrobank, Citibank, PNB, other commercial banks, a rural bank, etc. And if you have chosen already your bank, you choose whether a short-term or long-term savings instrument, peso or foreign currency, etc. And if you don't like their services and interest rates anymore, you pull out all your money and move to another bank or just invest it all. This is free market, freedom of the savers and freedom of the bankers. This does not exist?

You want to buy food and replenish your grocery items -- SM, Rustans, Puregold, Landmark, Robinsons, Waltermart, Shopwise, other supermarkets, or public market -- no one forces you to choose just one supermarket. This is free market. This does not exist?

You want to go to Europe or other Asian financial centers -- KLM, Cathay, Sing Air, Thai Air, JAL, KAL, PAL, MAS, etc. And once you've chosen your airline, you choose whether to take business class or first class or economy class. This freedom to choose your airline, your class and the mode of payment (cash or credit card or whatever). This does not exist?

You want to refuel your car -- Caltex, Shell, Total, Petron, Phoenix, PTT, etc. And you choose whether premium gasoline or unleaded gas or premium with additives, etc. This freedom to choose what gas station, to demand a good toilet from them, etc. This does not exist?

You want to run and stay fit and need a good running shoes -- Adidas, Nike, Fila, NB, WB, Puma, skechers, etc. And within each brand, there are dozen plus different models of running shoes. And you can choose whether to buy the pricey original product or fake but very cheap product. This does not exist?

Dozens of other examples how people benefit from free market, and they choose to ignore or be blind to it. Do people want the government to over-regulate banks so that people can choose only between BDO/BPI and DBP/Land bank? Do people wish that government will over-regulate retailing so that they can only choose between SM and Robinsons? Do people wish that government will over-regulate health insurance that people will only choose between PhilHealth and no private HMOs?

Do people want their tax money be used to bail out failing big corporations? Why? Corporate expansion and corporate bankruptcy are 100 percent part of capitalism. Why disallow corporate failures and bankruptcy?

Statists' paranoia of the free market and their deep desire for heavy state power, for more regulation and intervention of other people's lives, is the main driving force why many people want to enter politics. When they become an official, a legislator especially, we ordinary mortals will expect more government regulations, more intervention, more taxation, more authorization and accreditation.

Wednesday, October 13, 2010

PhilHealth Watch 3: Market failure vs. Government failure in health insurance

When my wife gave birth to our 2nd child early last week, I needed to get her member data record (MDR) as one of the requirements for PhilHealth claims/deductions. I went to PhilHealth Quirino Ave. office to get it. The printing of that document should not take more than 1 minute, I guess.

But the long lines just to get that MDR -- as shown in this photo -- was que horror! About 30+ people queuing to get an MDR or PhilHealth ID and only 1 PhilHealth staff to entertain them all. It took me 1:40 hours just to get that simple document.

Does PhilHealth think that their members are jobless people who have nothing else to do and hence, can endure queueing for hours just to get simple documents, or file claims? I filed a claim, again for my wife who was hospitalized about 3 months ago. Just to file the claim took me 2:05 hours. Then we will have to wait at least 60 working days (roughly 2 1/2 months) to get the claims.

While people endure the slowness of PhilHealth bureaucracy when their members get their rightful claims after religiously paying their mandatory monthly contributions for years, there is a poster inside, shown in this photo, that members can send in their contribution by texting. When you send your contribution, PhilHealth wants to get it within seconds or minutes. When you get your claims, PhilHealth wants you to wait for hours queuing, and several months waiting for the actual claims.

Now we are resigned to the fact that PhilHealth's universal coverage will become even bigger and bigger, fine. The poor deserves healthcare. But do we all pay bigger mandatory monthly contributions then? Do we all endure even longer queues and longer waiting period to get Philhealth benefits?

The future is not yet here but my guess is that the answer to my own questions above are all Yes. Endure more ugly government bureaucracies.

On March 25, 2009, I wrote this:

Health Insurance and Markets

Yesterday afternoon, I attended a round-table discussion by the "Ayos na Gamot sa Abot-Kayang Presyo" (AGAP), or Good ,medicines at affordable price. While I did not share with AGAP its position on the "cheaper medicines law", some leaders of AGAP are my friends as we belong to a new big coalition of NGOs on health transparency in the Philippines(to be formally launched in the next few days). That's why I was among those invited to attend the round-table discussion.

The topic was about health insurance in the Philippines and the main presenters were officials from the state-owned Philippine Health Insurance Corporation (PhilHealth), as well as a staff of a Congresswoman who authored a bill revising the law on PhilHealth. Other participants were mostly health NGOs affiliated with AGAP.

The PhilHealth guys presented and made further elaboration during the earlier part of the open forum. I have to raise my hand to make several points.

1. Our main concern is expanding access by more people to quality health care, or access to quality food, quality clothes, quality cellphone, etc. The problem has been identified and the solution is either more government intervention and subsidies, or less government intervention. Most of the concerns and sentiments are for the former.

2. But think of this: there is no government food insurance corporation -- all restaurants, all fastfood chains, all carinderias and street food vendors, are private, there is no government restaurant or government carinderia, and people are eating. There is no government transportation insurance corporation -- all buses, taxis, jeepneys, tricycles, airlines, shipping lines, etc. are private, and people are moving. There is no government clothing insurance corporation -- all clothes, pants, shoes, etc. are privately manufactured and distributed, and people have various clothing and footwear.

3. In education and health care, there is heavy government presence and intervention, and that's where problems and scandals come -- the Department of Education (DepEd) is among the most corrupt agencies in the government as perceived by many people, PhilHealth was used during the 2004 elections where millions of non-contributing people were given health cards, there are many reports of stealing and padding of claims by some hospitals, physicians and members amounting to huge amount of money.

4. Even if the staff and personnel of PhilHealth are good people and angels, but if the President and/or top political leaders are corrupt, the institution will be corrupted and so indirectly, will be its staff. Why did the "membership" of PhilHealth jumped suddenly in 2004 and not in 2003 or 2005? Because of the 2004 Presidential elections. So we can expect the same pattern next year where there will be another Presidential elections.

5. It is apparent therefore, that the solution lies in making the government step back, in reducing its intervention and allow the markets to come in a competitive environment. I am not saying that PhilHealth should be abolished or privatized, it can be shrank and become one of the many health insurance providers in the country. Membership in PhilHealth should also not be made made mandatory; it should be voluntary.

One reason why there is low formal business activities in the country, why there is high incidence of the informal sector, is because businesses have to pay plenty of mandatory taxes and contributions to the government: (1) BIR for monthly remittance of income tax, value added tax, other taxes; (2) SSS for monthly remittance of social security mandatory contributions; (3) Pag-IBIG for mandatory housing contributions, (4) PhilHealth for mandatory health insurance contribution, (5) local governments, (6) SEC, (7) DTI, etc. Government is a big burden for entrepreneurs, so that making health insurance voluntary and not mandatory will help reduce the burden in business and entrepreneurship. Also in the "cheaper medicines law", the government boasted of advancing this philosophy, yet government taxes and fees (national and local governments) comprise about 20 percent of the retail price of medicines, making said government pronouncements an irony if not a hypocrisy.

Oww, I could see some smiles and grumbles from the audience while I was talking. After I talked, some laughter. Maybe some were wondering, "which planet does that perspective come from?" :-)

More discussions and exchanges later, one PhilHealth official mentioned about "market failure" that is why government must come in to provide support to the poor and disadvantaged people. This I could not allow to pass, I rose my hands again and spoke for the second time.

There is market failure, true, but when there is stealing in government, that's "government failure". When the thieves in government do not go to prison and keep their positions instead, that's another "government failure". If those thieves will hire fellow crooks, thus perpetuating the system into large-scale, from top to bottom levels of corruption, that's another case of "government failure". There are many cases of government failures that we don't realize, we only hear "market failure".

Besides, there will always be market failure anytime, anywhere. If I demand a USB with 10 GB memory and sold for only P500 (nearly US$10), there is already market failure because while there is a demand (my personal demand), there is zero supply. So will government come in to produce that powerful but dirt-cheap USB? Another case, if there is a helicopter service from Quezon City to the Manila international airport for xxx thousand pesos and there are no takers or passengers, that again is market failure because while there is a supply of a service, there is zero demand. So will government come in to subsidize the fare in that helicopter service, in order to prevent the bankruptcy of the helicopter company?

There will always be market failure but it does not imply that government should come in all the time. Many if not most market failure does not need any government intervention because the market is capable of correcting itself (reduce or stop the supply of something if demand is small or zero, or vice versa).

In the case of health insurance, my idea is that people can have dual health insurance -- the one by government (PhilHealth) and a private health maintenance organization (HMO). The latter will be operating in a competitive environment and level playing field, so that each player will be forced to continuously improve their services. Allow also price segmentation, so that HMOs can charge P1,000 per year or P10,000 per year or P100,000 per year, depending on the budget and specific needs of their clients. Lower annual payment for fewer services, higher annual payment for plentiful and elaborate services.

This way, instances of claims-padding by the contributing members and/or physicians and hospitals can be minimized if not stopped because PhilHealth's coverage will be capped to a certain maximum. Whether patients will stay in a hospital for only 1 day or 1 week or 1 month, claims padding will be minimized. Whatever amount in excess of PhilHealth coverage can be sourced by the patients and their families to their HMOs or personal/household savings, or they can approach their local politicos for assistance. Price segmentation or price differentiation is a wonderful mechanism to allocate resources properly among people with different budget and different needs.

It was a great afternoon of exchanging ideas, but for me, it was an opportunity to douse some sense to heavy statist philosophy that more government intervention, taxation, regulation (and the corruption and waste that often come with such heavy intervention), is the solution to any social or economic problem.

Reducing some RP govt bureaucracies

Sometime in middle or late last month, the President of the Philippines abolished 10 agencies under it by allocating something like P1 annual budget for each of them. This should be one of the few good moves of the current administration. The projected savings will be PhP 305 million per year. The agencies abolished are:

Presidential Anti-Smuggling Group (PASG)
Presidential Anti-Graft Commission (PAGC)
Mindanao Development Council (MedCO)
Office of the North Luzon Quadrangle Area (ONLQR)
Office of External Affairs (OEA)
Minerals Development Council (MDC)
Luzon Urban Beltway Super Region (LUBSR)
Bicol River Basin Watershed Management Project (BRBWMP)
Office of the Presidential Adviser on Global Warming and Climate Change (OPAGWCC)
Office of the Presidential Adviser on New Government Centers (OPANGC).

Most bureaucracies exist for themselves. It is very seldom that a bureaucracy would self-liquidate. They are more likely to perpetuate and expand themselves forever, as there are endless reasons and alibis to justify their continued existence. The most convenient alibi of course, is to "fight poverty" via endless mechanisms that they can think of.

These agencies are actually small fish. But if the current administration will focus on small fish, then there should be several dozens more that should be abolished under the different departments and bureaus in the Executive branch.

The Legislative branch can likewise do its share of shrinking or abolishing certain reduntant offices. I have worked at the House of Representatives for 9 years in the 90s, there are just too many bureaucracies, committees, special committees, and other offices that tend to over-lap or just duplicate the functions of other offices. The officers of offices whose functions are duplicated by another office will not complain because that woould mean lesser work burden for them.

Taxpayers will ultimately shoulder the weight and burden of huge bureaucracies in government -- from the Executive to Legislative to Judiciary branches.

Tuesday, October 12, 2010

Taxes and growth

The lifeblood of society is work. The lifeblood of government is taxes. Work is sustained by returns and earnings. More work, more earnings. Taxes though, is sustained by coercion. That is why the simplest definition of taxation is "compulsory payment to the government."

The Economist showed a graph in its issue last week, "Effective tax rates", below.

Singapore and Hong Kong remains the top dynamic economies in the world today with low taxes. Russia joined the low, flat tax club only recently, with only about 12 percent income tax rate for both personal and corporate incomes.

Countries that want to atract more foreign businessmen and entrepreneurs should consider joining the low flat tax club. Going rate now for a number of countries is 10 percent flat rate, no other tiers or rates.

NINJA loans

In another discussion yahoogrouops where I belong, a friend commented about the Sydney and Jakarta conferences that I attended the past two weeks as "Free Market junket", and that

being a free market guy lets you travel around the world espousing the unabashed "free market" ideas when the whole world right now is reeking with government interventions left and right from - trade sanctions on China, the recent currency war between China, and the U.S.... Unabashed capitalism has led to the sub-prime crisis in America in 2008. Borrowing too much, while the economy was not making new money...

One of the greatest lies of statist thinking is that the recent global economic turmoil that started in the US was a product of free market policies. Wrong. The financial turmoil -- or what most would call as financial "crisis" -- happened precisely because of heavy state intervention and coercion in an otherwise private transactions between banks and borrowers. In particular, between home lenders and home borrowers.

Why? The "NINJA loans" explain it: "No Income, No Job or Assets" loans. The US government -- through the Federal Housing Administration (FHA), Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) -- coerced private banks to give housing loans even to NINJA people. Yes, it was declared a criminal act by private banks if they will refuse to lend housing loan to certain NINJA people.

For instance, FHA lowered the downpayment to get a house, traditionally at 20 percent, to only 3 percent early this decade, down to 0 in 2008. If there is no downpayment required, why rent? Why not get a house, even if you have no stable income? That's plain state intervention and coercion, pure and simple.

See such discussion by Tom Palmer here.

And it is no junket travel. The Americans for Tax Reforms (ATR) money is purely, 100 percent, private money -- from individuals, foundations, corporations, and other fund raising activities by ATR. If donors stop supporting them, end of story. It was ATR money that paid for my plane fare and hotel in Sydney. In return, organizers and participants have to show to ATR donors that the expenses are worth it.

Compare such travel on UN or WB or ADB or RP government or any government money -- well, taxpayers money actually -- that is where most junket travels occur.